How is China Coping With an Aging Population?

There is widespread sentiment globally that China is likely to grow old before it grows rich, as I have mentioned before. China's increasing presence on the world's geopolitical stage makes this an important issue, and a recent analysis by Statfor Global Intelligence takes a very sober look at it.

Two reports in Chinese media highlight different aspects of China's unfolding demographic crunch. The Ministry of Education reported Aug. 21 that more than 13,600 primary schools closed nationwide in 2012. The ministry looked to China's dramatically shifting demographic profile to explain the widespread closures, noting that between 2011 and 2012 the number of students in primary and secondary schools fell from nearly 150 million to 145 million. It also confirmed that between 2002 and 2012, the number of students enrolled in primary schools dropped by nearly 20 percent. The ministry's report comes one day after an article in People's Daily, the government newspaper, warned of China's impending social security crisis as the number of elderly is expected to rise from 194 million in 2012 to 300 million by 2025.

There have been many people arguing that the One-Child Policy needs to be rescinded in order to boost the Chinese birth rate and thus avoid a demographically-inspired collapse of the Chinese economy. But Statfor notes that a rise in the birth rate seems unlikely.

But even sweeping adjustments to the one-child policy or the national retirement age would create only temporary and partial buffers to the problem of demographic change. It is no longer clear that the one-child policy has any appreciable impact on population growth in China. China's low fertility rate (1.4 children per mother, compared with an average of 1.7 in developed countries and 2.0 in the United States) is at least as much a reflection of urban couples' struggles to cope with the rapidly rising cost of living and education in many Chinese cities as it is of draconian enforcement of the policy.

The article also notes that the Chinese government has proposed raising the national retirement age from 55 to 60 for women and from 60 to 65 for men. This is, in my opinion, a necessary move, and while the article correctly notes that this only delays the inevitable, it does at least delay it, offering more time for longer term solutions, if they exist, to come into play.

The crux of China's demographic challenge lies in the fact that, unlike Japan, South Korea, the United States and Western European countries, China's population will grow old before the majority of it is anywhere near middle-income status, let alone rich. This is historically unprecedented, and its implications are made all the more unpredictable by its coinciding with the Chinese economy's forced shift away from an economic model grounded in the exploitation of inexhaustibly cheap labor toward one in which young Chinese will be expected to sustain the country's economic life as workers and as consumers. A temporary reprieve from the demographic crisis will be difficult but possible with reform, but a long-term solution is far out of reach.

This is a set of comments worth contemplating, because what happens in China is unlikely to stay in China.